Helen Twose: Homeowners can lean on savings

KiwiSaver members experiencing financial hardship may be eligible to make a withdrawal for mortgage payments.

Some KiwiSaver members qualify for first home schemes. Photo / Dean Purcell

My husband and I have been KiwiSaver members since it started. Previously I owned a property which I sold and bought my current house. I bought this house about five years ago but because of high property prices in Auckland, I still owe the bank about $500,000. Is there any way I can withdraw some of our KiwiSaver money and put it towards our mortgage?

When KiwiSaver started, members could choose to put up to half of their own KiwiSaver contributions towards repaying the mortgage on their home, after 12 months of membership.

This was called mortgage diversion.

Not all KiwiSaver providers offered mortgage diversion to their members and at the time very few members chose to use it.

Mortgage diversion was closed to new applicants from June 1, 2009.

KiwiSaver members who are experiencing financial hardship may be eligible to make a withdrawal from their KiwiSaver accounts to meet the mortgage repayments on their home.

However, the criteria for financial hardship withdrawals are strict and government contributions cannot be withdrawn under this provision.

To qualify you would need to prove to your KiwiSaver scheme's trustee that the lender was looking to "enforce" the mortgage on your home because you were unable to meet the repayments.

Enforcement typically involves a mortgagee sale, where the lender takes possession of a property and sells it to recoup the money owed.

I have $25,000 in my account and have stopped working (got my five years in aged 67). I also have a large nest egg of around $300,000. Would it be silly to add this to KiwiSaver then draw down over the rest of my life to top up national super?

More KiwiSaver

First of all, I'd like to take a moment and congratulate you on saving this much for your retirement and also asking a great question.

Everyone is different, so without knowing all of your personal circumstances I suggest you consider the following:

Your account balance will be affected by investment returns, so it's important to review your investment strategy.

You will need to understand key things such as tax paid on your investment returns and whether your tax rate has changed now that you've retired.

Review the different fees charged by providers who manage your retirement savings, for example are there any withdrawal fees?

You may like to consider your ability to make regular or partial withdrawals from both your KiwiSaver and other savings vehicles. Different providers may have different rules about the amount you are able to withdraw or how regularly you can make these withdrawals.

You will need to check with your KiwiSaver provider if they will accept this transfer of $300,000 and whether there are any fees associated with this.

In addition, find out whether you have access to your account online and consider whether it's something that's important to you.

But most importantly, before making any changes to your investments and strategy, you should speak with an authorised financial adviser and ensure you read and understand all applicable disclosure documents.

Martin Lewington, head of Mercer New Zealand.

My partner and I own our present house. The first house we bought was done so with the guarantee of my parents and with no deposit. We sold, with a small capital gain which we kept in our account. The second house was again bought with the guarantee of my parents and no deposit. We are selling and it looks as though we will make a big capital gain. It is most likely that we will buy again, albeit in a market where house prices are 25 per cent higher than where we now live. Are we able to use KiwiSaver to help with our deposit? I would consider us to be in the same financial position as a first home buyer, our only real advantage is experience and a good relationship with the bank. Yes we will have the capital gain from the second property, but would like to use Kiwi Saver to increase our equity to a comfortable, sustainable level.

The KiwiSaver first home withdrawal scheme is designed to help people buy their first property and, generally, those who are applying for a withdrawal to put towards the purchase of a subsequent property will not qualify.

However, if, as you say, your financial position is what would be expected of a first home buyer then you may still qualify under the withdrawal scheme.

To qualify for a first home withdrawal in these circumstances, Housing New Zealand will need to confirm your eligibility before you apply to your provider.

Should you also wish to apply for a first home deposit subsidy, you will need to satisfy the following:

You've not made a KiwiSaver withdrawal.

You've been a KiwiSaver member for at least three years.

You no longer own a property.

You've earned a combined household income of $100,000 or less (before tax), in the last 12 months (one or two buyers).

Your assets total less than 20 per cent of the house price cap for the area you are buying in and which, if sold, can help you buy a property.

For example, if you are buying a house in the $400,000 cap area, your assets cannot be worth more than $80,000.

For a full list of what assets are considered by Housing New Zealand, please visit their website at www.hnzc.co.nz/kiwisaver. The website has checklists to help you with other property matters and your solicitor will be able to answer other questions you may have.

Martin Lewington, head of Mercer New Zealand.

Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.